EU sectoral sanctions to affect Belarus’ external public debt the most – Kalechits
MINSK, Jul 5 - PrimePress. The European Union’s sectoral sanctions will mostly affect Belarus’ external debt, a fairly large amount of which still needs to be refinanced. However, the impact of sanctions-related shocks on the Belarusian economy will be moderate and spread over time, Deputy Chairman of the National Bank of Belarus Dmitri Kalechits told BelTA state newswire.<br> <br> “Indeed, these measures [sectoral sanctions] will have some impact on the financial sector. We can expect that Belarus’ exports and, accordingly, foreign exchange earnings coming into the country will slightly decrease in the future. Given the high import intensity of the Belarusian economy, imports will decrease as well. All in all, it means that the impact of this shock on foreign trade will be moderate and spread over time. Possibilities to raise funds from external sources would narrow to a certain extent. The external public debt can be affected the most, since quite large amounts need refinancing,” said Kalechits.<br> <br> According to the Ministry of Finance of Belarus, an equivalent of $3.1 billion will be spent on repayment and servicing the country’s foreign debt in 2021, of which $3 billion will account for payments in foreign currencies. The principal debt repayment will reach $1.9 billion, while interest servicing will stand at $1.1 billion.<br> <br> According to Kalechits, “an increase in pressure on the currency market” is also possible. “Given the inertia of economic processes, this will not happen overnight. External shocks will produce effects gradually. Economic entities will adapt to the new challenges,” he explained.<br> <br> Kalechits believes that the floating exchange rate of Belarusian ruble used in Belarus as a regulatory tool “helps absorb external shocks and avoid accumulating imbalances.” “The Belarusian ruble remains undervalued. There are no significant accumulated imbalances in the economy. This helps the economy adapt to the new operating conditions, and allows mitigating negative shocks,” he said, “In addition to the direct impact through the foreign trade channels and the balance of payments in general, the effects of the restrictive measures may increase due to some internal factors as well.”<br> <br> “This is related to the expectations of economic entities. Starting last year, they have grown negative against the backdrop of external and internal shocks. Negative expectations still remain elevated, which leads to an outflow of individuals’ deposits from banks and increased demand for foreign exchange on the domestic market. This, in turn, affects financial institutions and their ability to lend to the economy. As a result of additional shocks, the negative expectations may increase even more,” said Kalechits.<br> <br> As previously reported, on June 24, 2021, the EU Council imposed sanctions against seven sectors of the Belarusian economy, pointing at the escalation of human rights violations in Belarus, and the incident with the forced landing of the Ryanair plane in Minsk on May 23, 2021.<br> <br> The EU Council prohibited to directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments with a maturity exceeding 90 days, issued after 29 June 2021. The ban targets bonds issued by Belarus, Belarus’ government, its public bodies, corporations or agencies.<br> <br> The ban also affects bonds issued by major credit or other institutions established in Belarus with over 50 % public ownership or control as of 29 June 2021 (Belarusbank, Belinvestbank, Belagroprombank). The sanctions target a legal person, entity or body established outside the Union whose proprietary rights are directly or indirectly owned for more than 50% by the above-listed entities; any legal person, entity or body acting on behalf or at the direction of the above-listed entities.<br> <br> In accordance with the decision of the EU Council, the EU member states will take necessary measures to limit the participation of multilateral development banks, of which they are members, in particular, the IBRD and the EBRD, in the affairs of Belarus. They will vote against granting new loans or other forms of financing to state organizations, without affecting projects that finance private sector support for small and medium-sized enterprises. End<br> <br>
2021-07-05
Primepress
EU sectoral sanctions to affect Belarus’ external public debt the most – Kalechits
“Indeed, these measures [sectoral sanctions] will have some impact on the financial sector. We can expect that Belarus’ exports and, accordingly, foreign exchange earnings coming into the country will slightly decrease in the future. Given the high import intensity of the Belarusian economy, imports will decrease as well. All in all, it means that the impact of this shock on foreign trade will be moderate and spread over time. Possibilities to raise funds from external sources would narrow to a certain extent. The external public debt can be affected the most, since quite large amounts need refinancing,” said Kalechits.
According to the Ministry of Finance of Belarus, an equivalent of $3.1 billion will be spent on repayment and servicing the country’s foreign debt in 2021, of which $3 billion will account for payments in foreign currencies. The principal debt repayment will reach $1.9 billion, while interest servicing will stand at $1.1 billion.
According to Kalechits, “an increase in pressure on the currency market” is also possible. “Given the inertia of economic processes, this will not happen overnight. External shocks will produce effects gradually. Economic entities will adapt to the new challenges,” he explained.
Kalechits believes that the floating exchange rate of Belarusian ruble used in Belarus as a regulatory tool “helps absorb external shocks and avoid accumulating imbalances.” “The Belarusian ruble remains undervalued. There are no significant accumulated imbalances in the economy. This helps the economy adapt to the new operating conditions, and allows mitigating negative shocks,” he said, “In addition to the direct impact through the foreign trade channels and the balance of payments in general, the effects of the restrictive measures may increase due to some internal factors as well.”
“This is related to the expectations of economic entities. Starting last year, they have grown negative against the backdrop of external and internal shocks. Negative expectations still remain elevated, which leads to an outflow of individuals’ deposits from banks and increased demand for foreign exchange on the domestic market. This, in turn, affects financial institutions and their ability to lend to the economy. As a result of additional shocks, the negative expectations may increase even more,” said Kalechits.
As previously reported, on June 24, 2021, the EU Council imposed sanctions against seven sectors of the Belarusian economy, pointing at the escalation of human rights violations in Belarus, and the incident with the forced landing of the Ryanair plane in Minsk on May 23, 2021.
The EU Council prohibited to directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments with a maturity exceeding 90 days, issued after 29 June 2021. The ban targets bonds issued by Belarus, Belarus’ government, its public bodies, corporations or agencies.
The ban also affects bonds issued by major credit or other institutions established in Belarus with over 50 % public ownership or control as of 29 June 2021 (Belarusbank, Belinvestbank, Belagroprombank). The sanctions target a legal person, entity or body established outside the Union whose proprietary rights are directly or indirectly owned for more than 50% by the above-listed entities; any legal person, entity or body acting on behalf or at the direction of the above-listed entities.
In accordance with the decision of the EU Council, the EU member states will take necessary measures to limit the participation of multilateral development banks, of which they are members, in particular, the IBRD and the EBRD, in the affairs of Belarus. They will vote against granting new loans or other forms of financing to state organizations, without affecting projects that finance private sector support for small and medium-sized enterprises. End